Investors of profitable companies expect dividends at least once every year, and many investor friendly companies have a track record of giving dividends every year from the annual/quarterly profits. But what happens if business climate is bad and the company is unable to make profits in a year and is unable to pay dividends to shareholders? Can the company pay dividend from its Reserves? Yes.

Following is the relevant rule from Company Law India, about Declaration of Dividend out of Reserves.
Reference: [GSR No. 427(E), dated July 24, 1975] Continue reading Company Law India: Declaration of Dividend out of Reserves →